‘Strengthening Accountability in Banking’ initiative and HR implications: what comes next?

Background

As you may be aware, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have been in joint consultation in respect of the 'Strengthening Accountability in Banking' initiative. This initiative was launched in response to the Parliamentary Commission on Banking Standards' 2013 report: 'Changing Banking for Good' which addressed not only the perceived loss of public trust in the financial services, following the 2008-2009 financial crisis, but also highlighted that 'serious regulatory failure…contributed to the failings in banking standards' 1.

As a result of this joint consultation, a new regulatory framework came into force in 2016 which applies to all 'relevant authorised persons' under the Financial Services and Markets Act 2000 (as amended and updated), namely: banks; building societies; credit unions; and PRA designated investment firms.

There are various changes contained within the new regulatory framework which are aimed at reviving the public's trust in senior management within the financial services sector, principally by clarifying the accountability and responsibility of senior managers and directors. For example, a senior management regime (SMR) will come into force next month2 which requires various measures to be taken by 'relevant authorised persons', including regulatory approval for certain Non-Executive Directors, an individual 'Statement of Responsibilities' for each senior manager and the implementation of a 'Responsibilities Map' for each firm.

Considerations for HR departments

In-house HR will appreciate the employee relations implications that may arise as a result of the new regulatory framework, particularly in clarifying the duties and responsibilities of senior staff members and directors. We have prepared a checklist of initial exercises which we would recommend that employers undertake in light of the new regulatory framework, so as to ensure a cohesive transition:

  • Conduct a detailed review of employees' contracts of employment

It is probable that revisions and updates to senior managers' terms and conditions of employment will be required in light of the new regulatory framework. Particular consideration should be given to the assessment of fitness and probity standards of senior individuals; the requirement for ongoing regulatory approval for the duration of the employment relationship; termination provisions; and an assurance from the employee that a 'seamless' handover of duties will be effected upon termination of their employment.

Employers should keep in mind that any variations to contracts of employment should be agreed by the employee before coming into effect. As such, it will be appropriate to carry out a consultation procedure with individuals in respect of any proposed changes to their contracts of employment.

  • Review all 'Statements of Responsibilities' and the 'Responsibilities Map'

The SMR emphasises the importance of 'Statement of Responsibilities in respect of senior managers and also firms' Responsibilities Maps. It is imperative that any such documentation is consistent with what is contained within employees' contracts of employment and any job descriptions in place. As such, these documents should be prepared, not only in light of regulatory requirements, but also with consideration of what job descriptions and duties may already be in existence for each employee. Generally, we would recommend that any Statement of Responsibilities and Responsibilities Maps are not contractually binding between employer and employee, so that they may be amended and updated from time to time.

  • Review policies and procedures applicable to senior managers' employment

Policies which will be of particular relevance include disciplinary policies; 'handover' policies; and fitness and probity or reporting procedures. The provisions contained within the relevant policies should be reviewed, and where necessary, updated to reflect the new regulatory requirements. Where policies are required to be updated, please bear in mind whether or not those policies form a part of the employee's contract of employment, as any changes would then require prior approval from the employee.

  • Provide training to senior employees, and emphasise personal obligations / liabilities

We would also recommend that training is provided to staff, so that the employer may inform staff of their individual responsibilities and personal accountability; responding to any queries from those individuals, particularly in respect of regulatory reporting requirements.

Contact us

We can assist by auditing your existing contractual documentation, and preparing revisions, as necessary, to ensure all your issued contracts and supporting documents comply with the new regime.

If you have any queries, or indeed if you would like any further information or assistance in respect of the impact of the new regulatory framework on HR functions, please do not hesitate to contact a member of the Employment and Benefits Team.

This article will be of particular interest to HR professionals, management with corporate governance, regulatory and compliance responsibilities and senior members of staff who carry out senior management functions within your organisation. We will be hosting a breakfast seminar at our Fountain Street office on this topic on Tuesday 22 March 2016. Places will be limited so if you would like to register interest for this seminar, please contact Kirsty Black kblack@algoodbody.com or on 02890 727 491.

Date published: 16 February 2016

1Parliamentary Commission on Banking Standards report: 'Changing Banking for Good' (June 2013)

2The majority of SMR comes into force on 7 March 2016